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Tesla's Biggest Hurdle? Getting Battery Cost Down (TSLA)

December 20, 2013 11:49 AM EST
Tesla's (Nasdaq: TSLA) standard 60-kilowatt-hour (kWh) battery stack packs a punch. It delivers around 208 miles on a single charge and gets the 4,647-pound Model S to 60 miles per hour in just 5.9 seconds. While that is solid performance, how much would an upgrade to an 85-kWh pack cost?

GreenCarReports asked that very question. The author noted that the range on his Model S wasn't quite enough to get between Supercharger stations on the interstate, in cold weather, at normal highway speeds (70 mph). Options included slowing down and driving with the heat off, or waiting at a Nissan station to get the extra battery charge needed to make it to the next station.

The author had his first buyers' remorse. Not for the car, but for not shelling out an extra $8,000 to upgrade the Model S battery to the 85-kWh version. The larger battery allows the Model S to go an estimated 265 miles in between charges, nearly 28 percent better than the standard.

Three options the author had were to swap the battery pack, trade-in the Model S for a new one with the larger battery, or trade-in the Model S for a used Model S with the battery upgrade, similar mileage, and similar age.

You can read the article, but the author was able to land a batter swap. The 85-kWh boosts the overall performance of the Model S due to it being able to deliver more current at load. That brings the horsepower from 302 up to 362, 0-to-60 time down 0.7 seconds, and top speed from 120 mph up to 125 mph. It would cost the author $18,000. Why?

Cost of the new 85-kWh battery pack is $44,564, while the authors' old pack (nine month old car, 10,000 miles) would garner a trade-in value of $29,681, or a difference of $14,883. (The 65-kWh batter pack is $37,102 new.) Other costs included labor, shipment, tax, and minor parts.

The conclusion could be made that most Model S buyers might opt for the larger battery pack given the piece of mind it provides and lower initial cost. But, the author in the GreenCarReports said it was mainly about distance between Supercharger stations. With Tesla looking to massively expand the Surpercharger network in the U.S. over the next year, more buyers might opt for the lower-cost battery, which would take the overall price lower.

(Note: the P85 Performance package uses the same 85-kWh battery, but gets the Model S to 60 mph in 4.2 seconds and adds 5 mph to bring the top speed up to 130 mph due to a high-performance drive inverter. That model starts around $85,000 with the battery pack still being half the cost.)

Also, with the battery packs running near $40,000, how many Model S units does Tesla need to move before it begins offering the lower-cost Model X sometime in 2015 - 16? It might be that Tesla is ready to run with the vehicle right now, but can't justify the cost of putting it on the market with a limited number of buyers and charging stations.

Having Daimler and Toyota partner, along with other automakers in the future, will bring the cost of the battery pack down more quickly, but its interesting to see that about half the cost of a new Model S goes into the battery pack.

Shares of Tesla are up 1.9 percent Friday.


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